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82 system was noted as generating a high cost relative to the rev- OBU identification number and amount due would be sent enue generated. to another office, where the identification number would then be associated with the person to be billed. Hence, no travel or location data other than the amount of charge owed Thick Versus Thin Client OBU would be associated with any vehicle. There are two basic methods to charge for VMT based on GPS data. The "thick client" approach requires that the OBU Visitors and Interoperability have the capability to determine where the vehicle is being driven and to apply the appropriate toll rates. The system then The Dutch government required that all users of the road sys- only needs to communicate the toll due by jurisdiction to the tem pay for using the roads. The companies took different back office for billing. With the "thin client" method, the OBU approaches to this requirement. One option for visitors was to maintains location data that is regularly transmitted to the back use a fixed toll that allowed either restricted or unlimited use of office. The determination of where the vehicle was driven and the road system for a specific period of time. Another was to the toll due is then done in the back office. require that everyone make use of an approved system. Under Most analysts have concluded that the thin client approach the required device option, visitors would use a device that is preferable. The thick client requires substantially more capa- could be acquired for temporary use and could be self-installed bilities in the OBU and requires that the units receive updated in the vehicle. In addition, Europe is developing an interoper- maps and toll information whenever there is a change. It does ability directive that requires toll-collection systems to be usable provide more inherent privacy and the potential to be used for for all toll systems in any European country. This requirement other applications. The thin client must transmit more infor- affects the cost of the systems, and some of the expense of the mation to the back office but does not have to receive map and OBU could be reduced without the extra capabilities. toll updates. Hence, the system is applied equitably to all users when there are changes in toll rates or road classification Enforcement (e.g., a road is added to the "congested" category). Siemens and Vodafone chose to use the thin client approach, while The basic approach to enforcement of the system was to T-Systems opted for the thick client approach. have DSRC communication with a series of fixed and move- able enforcement stations and to have mobile enforcement. The fixed enforcement stations would be on major roadways Communication and Recording Use and would determine the unit ID for vehicles on the system, Whether the calculations are done in the vehicle or in the compare that to the license plate registration, and check to see back office, there is a cost to process the data and to communi- if the observed time and place of operation were appropri- cate between the vehicle and the back office. The three proposed ately recorded in the back office. Moveable enforcement sys- Dutch VMT systems for which there is data chose cellular com- tems would perform the same basic function, but they would munication for this purpose. Two of the systems also proposed be moved around the road system on a regular basis. Mobile DSRC systems for use in enforcement. Daimler chose the enforcement would be done from specially equipped vehicles. exchanging of a data carrier or short-range communication sys- One provider (Vodafone) called for a system that compared tems for all data exchange. This saved the cost of the cellular reported travel with cell phone tower sequence as an addi- communication system and communication charges, but also tional enforcement mechanism. In addition, they proposed involved expenses for creating and managing the infrastruc- using cellular communication for enforcement, and this elim- ture. The cost estimates for cellular service varied from t7.5 to inated the need for DSRC communication equipment. t36 per user per year. The conversion factor at that time was about $1.25 per euro, yielding a cost estimate of approximately Summary of Three Dutch VMT Fee Systems $9.38 to $45 per user per year. Apparently this variation was due to differing assumptions about the impact of 8 million new The major components and their designs from three Dutch users on the cellular system and the impact of current excess VMT systems are summarized in Table 28. The major compo- capacity on pricing. nents include OBU, data communication, method to accom- All systems were required to meet European directives modate visitors, and enforcement. regarding privacy requirements for users of the system. For example, where charges would be calculated in the back 4.4.3 Cost Classification and Cost Data office, the procedure would be for the location data and an OBU identification number to be sent to one office. This The Dutch cost data were required to be reported for five would be used to calculate the amount due for that OBU. The categories: OBU, declaration and customer care, billing and

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83 Table 28. Summary of three Dutch VMT fee systems. Component Siemens T-Systems Vodafone OBU Thin Thick Thin Communication Cellular & DSRC Cellular & DSRC Cellular Calculation of charges Back office OBU Back office Visitors Fixed tolls or temporary Fixed tolls or Temporary units units temporary units Enforcement Fixed, movable, and Fixed, movable, and Cellular & fixed, mobile mobile movable, and mobile Source: Ministry of Transport, Public Works, and Water Management, 2006 payment, enforcement, and miscellaneous. Within these cat- characteristics. Minimum standards were set for items such egories there were separate estimates of the initial setup cost, as enforcement, ability to accommodate all users, interoper- annual operational cost (excluding depreciation), and annual ability with other European toll systems, and privacy. depreciation. The initial setup cost was an estimate of the As a result, the cost estimates have similar orders of magni- total start-up cost, but the expectation was that this cost would tude. However, there were substantial differences in both the be spread over a number of years. Hence, it is not expected technological approaches taken and the organization of tasks. that this cost will coincide with the full-scale operation of the These led to some real differences in the cost estimates and system. In general, it was expected that an attempt to conduct some differences based on where costs are allocated. For an all-at-once start would increase cost and introduce other example, the costs allocated to the "miscellaneous" category complications. The annual operating cost and annual depre- differ quite substantially across the providers. In general, the ciation were then based on the first year of full operation of cost of the OBUs was the single largest cost category, but this the system. Given the downward trend in the cost of the represents a capital cost and is not directly comparable to the OBUs, there were different assumptions about the cost at the annual costs. Further, the capital cost has the potential to be time of initiation versus the historical cost. reduced if the system is developed for some alternative use and The basic requirement was that the system had to accommo- the pricing system is then an add-on to an existing system. date 8 million Dutch vehicles and any foreign vehicles operated Depending on the expected life of the OBU, the annualized in the country. The systems took different approaches to cost would be the appropriate amount to compare to revenue. fulfilling these requirements. One system required that all The estimates of the annual operating costs are somewhat vehicles have permanent operational devices, increasing the more surprising than the estimates for the OBU cost. These number of units required. Other systems allowed for the use of operating cost estimates vary significantly between systems. fixed tolls for specific time periods and the option of using a Each of the systems considered for the Dutch system had temporary system. The fixed toll would allow unlimited use of GPS-based OBUs and therefore required that the location the roads for a specific period of time and would be enforced data be converted into usage data that could then be used as with license plate recognition. The use of temporary units the basis for charges. As noted earlier, the biggest issue here required that they be easy to install and remove and that pay- was the choice between onboard or back-office calculations ment accounts would have to be set up for each user. of this information. T-Systems chose to calculate the infor- Cost estimates were based on varying degrees of detailed mation on board, while Siemens and Vodafone chose the cost calculations by the different responders. Some of the data back office method. Since the thick unit requires more com- were considered proprietary and were not made public. The puting power, storage capacity, and so on, it was expected to required public level of detail is what is used in this report. be the more expensive unit. However, the cost estimates show More detailed data were available for some categories from the OBU as being relatively less expensive based on expected some providers, but the data were not provided in any con- cost in 2010. However, the need to update maps, tolls, and sistent manner across the providers. other information results in relatively high operation cost, and these costs are based on 2005 estimates. Siemens based its cost estimates on a 2012 start, so its lower Discussion of the Dutch VMT Cost Data cost is at least partially due to an assumption that both capi- The general approach to the Dutch VMT system was tal and operating costs would continue to decrease over time. largely determined by the required elements specified for the The Siemens approach was based on two types of OBU--one system. The system had to be able to charge all vehicles for that is permanently installed in the vehicle and one that can using Dutch roads based on the amount of use and vehicle be used temporarily. In addition, temporary or infrequent

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84 users would have the option to purchase a temporary fixed generation systems. Each provider may have made assump- cost pass that would allow unlimited road use for a limited tions for certain parameters and estimated others. The key time period. parameters included lane miles, centerline miles, VMT gener- The Vodafone approach was to require that all users have an ated, number of vehicles, total revenue, average VMT fee rates OBU, but they also identified four possible types of OBU. One (or tax rates), and number of staff. These parameters or the was a unit that met all European interoperability requirements, information from which they could be derived were included the second was a system with only the communication capabil- in some reports and omitted in others. Where data are missing ities needed for the Dutch pricing system, the third was a GPS for one vendor but available for another, the information is system that could be attached to an existing cell phone for data assumed to be the same since they were all developed under the transmission, and the fourth was a projection of cell phone same set of assumptions regarding the road system, number of technologies capable of implementing the pricing system. vehicles, and so on. Appendix C shows the data for parameters They also proposed a unique enforcement system based on cell that were found for each of the three different approaches records that supplemented the required enforcement system. designed by providers, converted from kilometers to miles and Table 29 shows the cost estimates converted from euros to euros to dollars where appropriate. These data were used for dollars using an approximate ratio of 1.25 dollars per euro for the comparison across systems. the relevant time period. In addition, the 15% contingency allowance is included but the 19% VAT is not. The totals for Discussion of Factors That Could Reduce Cost the initial setup costs are very similar. However, the estimates of the annual operating cost and the annual depreciation vary As part of this study, EFKON AG was commissioned to quite substantially. identify systems that would not meet all of the requirements specified for the full cost study but would be lower in cost. A number of alternative systems are discussed in some detail, but Relevant Parameters Used in Dutch VMT Cost Data there appear to be two basic findings of relevance for the cost For this study, certain parameters of the system served analysis. The first is that the cost to meet the European inter- were used to generate comparisons across different revenue- operability requirements could be substantial. The system that Table 29. VMT fees cost estimates (in $000s). Cost Average over Cost Item Siemens T-Systems Vodafone Category Providers Initial Setup Cost OBUs $1,890,411 $1,698,067 $1,664,625 $1,751,034 Administrative 5,498 217,631 133,688 118,939 Collection 85,531 41,397 41,687 56,205 Enforcement 119,251 81,355 77,625 92,744 Miscellaneous 202,225 201,285 304,750 236,087 Sum 2,302,916 2,239,735 2,222,375 2,255,009 Annual Operating Cost OBUs 165,938 126,908 37,375 110,074 Administrative 111,132 510,427 406,813 342,791 Collection 110,976 231,283 58,938 133,732 Enforcement 11,883 80,751 54,625 49,086 Miscellaneous 18,446 24,087 53,188 31,907 Sum 418,375 973,456 610,939 667,590 Annual Depreciation OBUs 41,508 267,006 232,875 180,463 Administrative 4,550 31,973 27,313 21,279 Collection 2,156 5,304 10,063 5,841 Enforcement 8,947 14,257 10,063 11,089 Miscellaneous 5,917 10,351 10,063 8,777 Sum 63,078 328,892 290,377 227,449 Source: Based on data from Ministry of Transport, Public Works, and Water Management, 2006